If you’re looking for an answer to the question ‘how much can you earn without paying taxes in 2012?’ then you’ve come to the right place. In our guide, we look at the changes to your Personal Allowance in 2012/13.
We also look at changes to other allowances and examine how much tax-free income you’ll be able to earn in 2012/13. Keep reading to learn more.
Your tax free income in 2012/13
Your Personal Allowance is the amount of income you are allowed to earn each year before you start to pay tax. The vast majority of taxpayers are eligible for the basic Personal Allowance. The chart below shows the basic Personal Allowance in the tax year 2011/12, the 2012/13 tax year and the increase between the two years:
|Up to age 65||£7,475||+£630||£8,105|
|Age 75 and over||£10,090||+£570||£10,660|
This means that if you’re under the age of 65 and you’re eligible for the full Personal Allowance in 2012/13, you can earn £8,105 of income before you’ll start to pay tax.
Other allowances in 2012/13
If you are married and living together, were married before 5 December 2005 and at least one spouse was born before 6 April 1935, the husband can claim Married Couple’s Allowance.
If you are married or in a civil partnership and living together and at least one spouse or partner was born before 6 April 1935, the person with the higher income can claim Married Couple’s Allowance.
HMRC reduce your tax bill by ten per cent of the Married Couple’s Allowance to which you’re entitled. The actual amount depends on the relevant person’s income.
If you’re certified blind and are on a local authority register of blind persons, or if you live in Scotland or Northern Ireland and you are unable to perform any work for which eyesight is essential, you can claim Blind Person’s Allowance.
Blind Person’s Allowance is rising by £120 in 2012/13 from £1,980 to £2,100.
What tax you do pay on the rest of your income
If you earn less than your allowances then you’ll generally pay no tax on your income. However, if you earn more than your total allowances then you’ll pay tax on your income above this amount at the following levels:
|20% – basic rate||£0 -£35,000||£0 – £34,370|
|40% – higher rate||£35,001 to £150,000||£34,371 to £150,000|
|50% – additional rate||Over £150,000||Over £150,000|
You will notice that the point at which you start to pay the higher rate of Income Tax will decrease by £630 to £34,370 in 2012/13. This is to balance the £630 increase in the personal allowance for people aged under 65.